KARACHI: Value-Added Textile Exporters are highly perturbed and dissatisfied over proposed imposition of “Additional Tax on income, profits and gains” u/s 99D and have rejected it by terming “harsh” and “anti-business” move by the Government.

Textile Exporters are already burdened with high operational cost of manufacturing meant for export whereby the sitting Government has previously deprived level playing field and fair competitive environment by discontinuing Regionally Competitive Energy Tariff (RCET) and also suspended Duty Draw Back on Local Taxes & Levies under National Textile & Apparel Policy 2020-2025 which has made export business unviable and uncompetitive. In previous fiscal year, super tax was imposed for one year which has been proposed to be imposed again coming financial year is also unfair for export business.

Exporters have been facing unprecedented set of challenges for the last one year of the sitting Government whereby severe restrictions were previously imposed on opening of LCs which had shattered the production of export due to unavailability of raw material. The prevailing economic turmoil in the country on political grounds has also brought negative impact on the export business which had created a bleak picture in the eyes of international buyers who either curtailed their textile orders or had shifted them to other regional countries. Presently, the manufacturing cost meant for export is so high that exporters cannot work on breakeven cost. The buyer are also not confirming the said breakeven cost which includes zero profit of exporters as the  Regional Competing countries are even selling at lesser prices/costs depriving the Pakistani exporters from their orders. Further burdening the exporters with additional tax burden will compel them to shift their industries abroad resulting massive flight of capital and unemployment. The Government should consider to refrain from imposing proposed imposition of “Additional Tax on income, profits and gains” u/s 99D or otherwise exempt the exporters from this harsh additional taxation measures. This was stated by Muhammad Jawed Bilwani, Chairman, Pakistan Apparel Forum, in his statement to press and electronic media.

Bilwani expressed concern that any income on which income and super tax have already been levied at a prescribed rate under normal course of business should not be further burdened with additional tax under proposed section 99D. Exporters who might have accrued exchange gains on a particular transaction does not necessarily mean additional income or a gain for the whole year since exporters are facing a number of aforementioned cost-increase factors due to events which duly offset any one-time gain. Such factors also include, (a) buyers getting prices reduced immediately in the wake of devaluation of PKR; (b) loss on account of non-receipt of DLTL and late receipt of tax refunds under FBR’s FASTER system for which working capital has to be financed at exorbitant interest rates; (c) abrupt discontinuation of RCET and immediate increase in energy and other input costs following every devaluation. At least 918 exporters have since gone out of export business due to incurring losses on account of above factors. If exporters are further squeezed, huge number of them will close down, resulting in further decrease in exports which is not at all desirable under the current economic situation. Relevant to mention here that, in the past, where exporters got some gain on one side faced huge losses on account of exorbitant freight charges during COVID on other side. Exporters who have also increased their production capacities are unable to operate as they have become unviable as well and cannot function owing to highest cost of manufacturing for export in the history of Pakistan.

Bilwani added that Exporters have already opposed this proposed imposition and agitated to the Anomaly Committee to recommend and delete the said proposed section. The Government in Federal Budget 2023-2024 has announced and proposed in the 99-D for imposing additional tax on certain income, profits and gains. Under the Finance Bill 2023-24, it states, “Notwithstanding anything contained in this Ordinance or any other law for the time being in force, for any of the preceding five tax years from tax year 2023 and onwards, in addition to any tax charged, paid or payable under any of the provision of the Ordinance, an additional tax shall be imposed on every person who has any income, profit or gains that have arisen to any person or class of persons due to any economic factor or factors that resulted in unexpected income, profits or gains whether or not disclosed in the financial statements. (2) Federal Government, may through a notification in the official Gazette – (a) determine economic factor or factors including but not limited to international price fluctuation having bearing on any commodity price in Pakistan or any sector of the economy or difference in income, profit or gains on account of foreign currency fluctuation; (b) provide the rate not exceeding fifty percent of such income, profits or gains; (c) provide for the scope, time and payment of tax payable under this section in such manner and with such conditions as may be specified; and (d) exempt any person or classes of persons, any income or classes of income from the application of this section, subject to any condition as may be specified.” A legal challenge to the implementation of these provisions may arise on certain constitutional grounds and principles laid down by the Superior Courts including with regard to past and closed transactions.

Bilwani demanded that proposed section should be deleted because  any income, on which tax under normal course, has been levied, should not be taxed again. Moreover, existing rates of income tax are already too high. This further tax will burden export sector, shall make it unviable leading to flight of capital.